Four key trends in the alternative finance sector

The retreat of traditional banks from the small business lending arena has been well documented and discussed at great length in recent years.

It is well understood by now that the situation has made life much more difficult for SMEs in the UK and elsewhere but alternatives are emerging all the time and new markets are growing in prominence.

Here’s a look at a few of the key ways in which the alternative finance industry is likely to develop in the coming years.

1 – More specialist services

A particularly notable feature of the new financing options that are being made available is that they are often very specialised and focused purely on meeting demand in one area of need for SMEs.

This trend is only likely to continue as niche lenders develop their offerings and tailor them ever-more precisely to what their target customers want and need. In short, the one-size-fits-all approach that mainstream banks have tended to have towards SME lending could soon become a thing of the past.

2 – Faster access to finance options

Like everyone else, business men and women are coming to expect and demand rapid access to information, services and solutions of all kinds. In the context of company financing, this means businesses will expect to see their lending and funding processes streamlined considerably and rendered simple and seamless in years to come.

All manner of online platforms are already making this scenario a reality and the relatively sluggish bank loan application processes are struggling to compete and keep pace with more flexible and tech-savvy alternative service providers.

3 – New relationships will develop

Not so long ago, it might well have been the case that having a long-standing relationship with a bank manager might’ve given a company director a good chance of securing financial backing for his or her business. In the current climate, these relationships tend to count for very little, with banks proving stubbornly unwilling to lend to small businesses under almost every circumstance.

In years to come, company bosses will increasingly form important working relationships with alternative funding providers who will be better placed to meet their needs from a funding and finance perspective.

4 – Crowdfunding will continue to grow

Crowdfunding and peer-to-peer lending have caused something of a sensation as an alternative finance option for small and startup companies around the world. The scope of this market seems unbounded and after rapid initial growth it looks likely to settle into place as an important part of a broader alternative funding picture.

Clear demand

Demand for loans and for finance will always remain among companies with ambition and their success strengthens national economic growth in crucial ways.

There are, however, few signs that banks are set to step back into the fray to meet this demand any time soon but thankfully there are other service providers proving well placed to emerge as genuine and viable alternatives.

So the stage is set for very significant change in the way small businesses are funded and every reason to expect the above trends to gather pace.

Conrad Ford is Managing Director of Check Business, a technology start-up that helps SMEs solve the key business challenges of: getting paid, finding new customers, and raising finance. Conrad has a Masters from Cambridge University. You can find more information on his website or follow him on Twitter. fundingoptions.com